LAHORE: Revenue generation from the corporate sector has dropped by 30 percent due to massive closures, particularly in the textile sector, said sources in the Corporate Tax Office (CTO) Lahore.
They said the number of closed-down units is on the rise, which is hampering the revenue growth over the last eight months, ringing alarm bells in the Federal Board of Revenue (FBR).
The sources feared a downward revision in the overall revenue target, which has already witnessed a drop of Rs240 billion during the first eight months of the current fiscal year.
Accordingly, they added, the Board would have no option but to revise the overall collection target at the end of the last quarter ahead.
It is also worrisome for the tax authorities in the CTO Lahore that the revenue shortfall has been witnessed under income tax. Therefore, they said the Board was considering collecting advance tax from leading companies.
It has also issued verbal directions that taxpayers should pay against the current demands to meet the revenue gap. Also, they said, the Board may also opt for generating revenue through fake demands and exemptions to meet the revenue target.
The tax experts have pointed out that a shortfall in the FBR’s collection for the first eight months of the ongoing fiscal year, Rs 240 billion to be precise is not a surprise, as the factors like import curbs, high and persistent inflation, and the hawkish monetary policy has contracted the economy, squeezed production and reduced incomes, so it’s only natural for tax receipts to shrink as well.
Corporate firms are found deducting contributions made to unapproved gratuity funds while computing the income of their employees under the head of “income from business”. Sources have pointed out that most of the leading corporate firms are doing such mistakes and misinterpreting the income tax law on misguided advice from their tax consultants.
Sources have further pointed out that all such endeavors fall under the category of tax avoidance, which ultimately hit the revenue generation task of the department.
Undue delay in the retirement of Letters of Credit (LCs) documents by banks is also causing troubles for the corporate sector, as forged documents submitted by their international suppliers for the clearance of credit documents against fraudulent deliveries are adding insult to their injuries.
In most fraudulent transactions, the sellers/suppliers ship substandard, below-weight, and worthless materials, and forge their credit documents in accordance with the contractual terms and conditions.
Copyright Business Recorder, 2023